February 26, 2010

History has proven that difficult economic environments can and often produce high-growth enterprises when executives take full advantage ineffective competitors and substitutes.

Today, the opportunities to create wealth are available in the form of acquiring customers, suppliers, and talent that is unsatisfied with their current situation; especially in light of how poorly… read more ...

February 24, 2010

For those of us that are advocates, supporters, and depend on America’s small businesses, we are all keenly interested in what the future economic environment will present, and what if any the “recovery” will be like in the near-term.

Since World War II, history has conditioned us that recessionary times, especially those presenting deep recessionary attributes, have been followed by robust economic growth, including a significant lowering of unemployment, and increased spending on the part of both business and consumers. Generally all of the “steep” downturns have been followed by strong recoveries that overtime has overcome the effects of those downturns.

It is clear to us at the Ephor Group that the magnitude of recovery from this “deep recession” will not be the sharp V- shape pattern we have experienced in the past.

We believe that there are near-term factors that are specific to our current economic environment and several longer term changes to the fundamental infrastructure of the economy that will create a decade of slow economic growth.

Below we have outlined and provided a brief discussion on five (5) of the areas that will be weighing down the economy in the near-term.

1. Commercial Real Estate: Members of Federal Reserve Board and the U.S. Senate Finance Committee for Small Businesses have cited commercial real estate as a critical near-term barrier to economic growth. It is clear that weaknesses in the sector will be a significant drag on the economy in 2010 and beyond, as construction activities will continue to contract and lenders are forced to further write-down values.

In that commercial real estate loans are typically held by small regional banks, the good news is this sector does not pose the same systemic threat that was illustrated by the residential real estate sector. However commercial real estate is almost always a lagging indicator of economy therefore the continued weakness in this sector will be a prolonged recovery inhibitor of the economy.

2. Small Business Spending:Historically small businesses have been responsible for nearly 60% of the GDP and nearly 65% of all jobs. This deep recession has affected small business more so than any other Post War cycle. Access to credit has obstructed small businesses ability to make new investments, therefore this limitation will continue in the near-term.

With government borrowing huge amounts of money to finance bailouts, economic stimulus packages, and to support big government policies, there is simply less capital available for the private sector to borrow money.

This will result in businesses remaining cautious and unlikely to add non-critical jobs and perhaps even temporary workers even in the very near-term. These forces clearly are within the realm of allowing a “double-dip recession” to occur which will only further stagnate economic growth throughout this decade.

3. Demographic Changes to the Population: As we all know the workforce is aging, and an aging population results in a workforce that will grow more slowly then in previous post war periods. Additionally history has proven to us that younger workforces are less productive than older workforces.

It needs to be noted that the number of people in their peak spending years (around 50 years old) will start to decline at an accelerating rate as the baby boomers age. Therefore this recession is likely to incent the baby boomers to postpone retirement out of necessity or promote the inclination to “preserve what they have,” therefore resulting in less time and desire to spend.

Longer-term we at Ephor Group are concerned that we will have a society where the elderly soak up huge amounts of public funds at the expense of education needed to enhance the skills of the younger and less productive workforce. Therefore over the next decade we potentially will have “skill demand versus skill supply imbalance”, creating a significant barrier to economic growth.

4. Slower Productivity Growth: To reduce the deficit, and to deal with the increased regulation imposed by the current administration we will no doubt face higher taxes. This married with the labor force growing more slowly and becoming less productive, results in the fact that any economic growth will have to be driven by non labor productivity enhancements.

Technological breakthroughs that could significantly increase productivity are very difficult to predict in today’s difficult economic posture. Innovation and technology especially in the productivity arena historically have come from small businesses that have been funded by venture capital and “other equity sources”. Presently, as presented earlier, these “high-risk-taking” organizations are growth capital deficient, resulting in the question: How will our society overcome this need for increased productivity?

5. Changing Consumer Spending Habits: All the consumer spending statistics and studies are indicating that the American consumer is making permanent changes to their spending habits as a result of the past two years economic challenges, which will curtail consumer spending for the next decade.

The basic question remains to be answered: Has the American consumer learned not buy cars, houses and goods they cannot afford?

In any event the “job crisis” that will prevail at least for the near-term will inhibit consumer spending thus creating a drag on the economy that was not prevalent in other recoveries.

In conclusion: it should be obvious the aforementioned presents a very pragmatic outlook that cannot be ignored, and clearly cannot be effectively overcome and managed by “legacy thinking” and legacy management processes.

Our current situation commands change, decisive and overt actions to be taken by founders, owners, investors and stakeholders in small businesses or the future existence of their organizations are at risk. The time has come to not just “survive” ……… but to “THRIVE”!!!

The small business community’s “Bailout” will be a function of all of us having the courage to embrace the needed change and seek out assistance and additional skills; garnering a competent command of the issues presented here; examining and altering the strategies and our business models to reflect the “new economy”; make the commitment to our employees to provide the skills necessary for them and us to succeed; and finally alter our business processes and technology application to insure that we increase our productivity.

February 23, 2010

Ask yourself these two questions to determine whether you have the right trusted advisor:

Does my advisor have the right set of experiences to advise me?

Is my advisor aligned with my goals?

Our experience at Ephor Group tells us that advisor input is most valuable when they understand your goals and objectives for the business, understand your strengths and needs, and they desire to have all interested parties aligned.

A “non-aligned example” would be asking "Lifestyle Advisors" to support creating growth and wealth outcomes for the business.

If you are a startup business you need advisors that understand the bootstrap mentality.

If you are a fast growth enterprise and you rely on “Lifestyle” business advisors you will remain a small business or struggle to handle the demands of growth.

While there are a plethora of advisors, find one that fits with your near-term economic reality and long-term vision and goals.

There is a difference between trusting a professional and being a trusted advisor; the Trusted Advisor criteria detailed below will help you to evaluate your advisors.

Trusted Advisor Criteria:

Industry Experience

Wisdom comes from experience and experience comes from mistakes and successes.

If they have a lot of industry knowledge but it's NOT broad (i.e. focused on only one functional aspect), then forget it.

Accountability

Consultants are often better talkers than they are doers.

Accountability starts and ends with whether they do what they say; both in terms of little items and results.

Fit

Do they have proven methodologies (tried and true practices)?

Do their experiences fit your organization’s maturity, complexity, and needs?

Approach

There are three (3) types of advisors: Experts (Specialists in a particular niche or function), b) Facilitators (collaborative types that foster change and team work) and c) Hired Hands (those that you assign a task).

Track-Record

How many success stories do they have for your particular industry and situation?

Credentials

Degrees, Certifications, Awards, Titles, Publications.

Most owners consider their advisors to be their corporate attorney, accountant, business finance advisor, and spouse. Depending on the type of business and your goals you may need a Trusted Advisor that will help you accomplish your goals and serve as your “Chief Strategy Officer.” A Chief Strategy Officer (CSO) supports and facilitates the following:

Asks the hard questions; tells management what they need to hear, not what they want to hear.

Delivers results-driven, professional counsel and solutions for complex situations.

Enables management to think and act like an entrepreneurs, focusing on business growth and customers.

Provides alternatives and recommendations to complex problems as part of the decision making process.

Provides a higher level of analytical support relating the results from operations to the financial statements and explains the variances to budget and the prior year.

Helps identify key company initiatives on which to focus and in what priority sequence.

Develops and implements operational plans based on the strategy developed in the business plan.

Uses prior broad based industry experience to ensure the marketing, sales, services, and all partners are executing according to best practices.

Provides treasury and capital market support to secure funding alternatives and interfaces with the lenders regarding the performance of the business.

Successful management teams seek outside perspectives and develop strong support groups. A strong synergy with a Trusted Advisor allows the management team to focus on what they do best.

February 03, 2010

In this economy the opportunity to sustain and create wealth requires altering business strategies and changing the operational model to overcome both exogenous barriers to success and internal blockers as well.

Over the past eight years Ephor Group has worked with literally hundreds of small businesses to overcome the most common barriers to wealth creation. The paper titled: Ten Barriers To Wealth Creationidentifies the most common barriers and provides guidance and processes to create a roadmap for near and long-term success.